Super does not form part of your estate. For this reason, and to ensure that your super ends up where you intend, you will need to provide the trustee of your super fund with a nomination that sets out who receives your super, and in what proportions.
Super nominations do not need to be as boring (and perhaps as inappropriate) as “I nominate my spouse to receive 100% of my super”.
Set out below are 7 ways to get creative – and more effective – with your super nominations.
Public offer funds
If you are in a public offer super fund, then your choices as to whom and how your super is paid after you die may be limited.
You will generally be able to specify ‘who’ gets your super, and in what ‘proportions’. You generally will not be able to specify specific amounts, nor specify even basic ‘what if’ scenarios, such as “If Jonny is under 25 he is to get 75% of my super, otherwise my super is to be split equally among my children”.
This is because it is impractical for the trustees of these large funds to administer the complexity.
If you have a self-managed super fund (SMSF), and a good Fund Deed, then your options are likely to be much broader.
- You can put in place a binding nomination that lasts longer than 3 years.
- You can make part of your nomination binding, and part non-binding. This may be useful when you need the trustee to have some discretion, but not complete discretion, e.g. binding to your spouse, and non-binding to your children.
- You can specify not only ‘who’ will receive your benefits, but you may specify fixed or proportionate amounts.
- You can make conditional directions, e.g. “If Jonny has not yet reached 25 then he is to get 50%, otherwise he is to get 25%”.
- You can direct a specific asset to a specific beneficiary, e.g. “the shares in BHP are to go to Jenny, and my interest in the investment property is to go to James”.
- You can nominate for a super pension to be established for a pension beneficiary. This is useful when you want to keep assets within super for your beneficiaries, rather than have them paid out.
- You can set up a child pension if your children satisfy the relevant criteria, or otherwise have the benefits paid elsewhere.
Whether any of these examples are possible for you and your super nomination will depend on the rules of your SMSF Deed.
Call us on 1300 654 590 or email us to discuss how to use SMSF nominations and rules to effectively manage your super benefits. We can also assist you to update your SMSF Deed to allow you more flexibility with your super nominations.
Using your Will to deal with your super
Only ‘SIS dependents’ can receive death benefits directly from your super fund. These are limited to your spouse, your children, and people financially dependent on you.
If you want to give you super to someone else, e.g. your grandchildren or a trust, then you need to direct it to your personal ‘estate’ and deal with it through your Will.
Once the super is in your estate, you can direct it how and where you like, e.g. to a non-SIS dependent, such as your grandchildren, to a family trust, into a testamentary trust, into an education trust, or to a charity.
What we see go wrong
Things we see go wrong include:
- People do not make a nomination and the trustee directs the benefits to people in a way that is inconsistent with their broader estate planning.
- People nominate someone who is not a ‘SIS dependent’ – and therefore cannot receive the benefits.
- People nominate someone who is not a ‘tax dependent’, and end up paying thousands of dollars in unnecessary tax.
- Super ends up in your personal estate and is not effectively dealt with through your Will.
- People do not read the SMSF Fund Deed, and try to do something that is not provided for in the deed.
Super nominations are often not given as much thought as they should be – often with major unintended consequences. Invest some time and thought to get this aspect of your estate planning in order.
Click here to find out more about how we can help you with your Estate Planning needs.
WARNING & REPUBLISHING
This publication contains general information only, and is not to be construed as legal advice. Laws differs in each jurisdiction in Australia, and may be interpreted or applied differently depending on your location. This publication is not to be used as a substitute for legal advice tailored to your individual situation. Use of this publication does not create or constitute a solicitor-client relationship between Andreyev Lawyers and any user of this publication.